Retirement planning:
Where to start

Published: 26 July 2019

As one phase of life ends, another begins – and with the average retiree expected to live for around 20 years or more, the post-work phase lasts much longer than it used to.

The average 65-year old female in the UK can expect to live for another 20.9 years, according to the most recent figures from the Office for National Statistics, while her typical male counterpart has another 18.6 years in front of him1.

A longer retirement means more time to pursue your dreams, spend time with the people you love, travel, relax or simply take day-to-day life a bit easier, perhaps while phasing out your working life over a period of time.

It also means a few more potential challenges – the longer you live for in retirement, the more likely that events such as divorce, bereavement, ill health and long-term care will have an impact on your life and your finances.

That’s why it’s really worth planning and preparing for, both for the goals you want to reach and the potential problems to avoid or mitigate. Retirement might still be five, 10 or more years away for you, but that’s not too soon to be thinking about what it might look like.

Start by asking yourself some questions

If you’re not sure where to start, answering these questions might help:

  • When do I want to retire?
  • Do I want a ‘cliff-edge’ retirement when I stop working altogether right away, or would I prefer a ‘phased’ retirement?
  • What are my main income sources likely to be?
  • What will I spend my money on?
  • What would my ideal day in retirement look like, and what would it take to achieve it?
  • Is it important for me to be able to pass on my wealth to family and/or friends when I die?
  • Am I likely to want to move house, downsize or even live in a different country?

Consider your future spending patterns

Our list covers just some of the many questions you will likely need to consider as you get thinking about your post-work life in more detail. Some of them touch on the expenditure that we might incur in our later years. But it’s worth taking a closer look at how our spending patterns change in retirement, because they might not be what you expect.

For example, over 20 years or so, you might imagine that spending would be higher at the beginning of retirement, when the immediate post-work plans like holidays and home renovations come into force. Then it might dip again as you settle into your reshaped life, before rising towards the end as care costs potentially become a factor.

But some research suggests it’s not that straightforward. A 2015 study by the International Longevity Centre (ILC-UK) found that spending on most non-essential items actually starts to decrease from the age of 50 onwards2. In other words, retirees aren’t spending lavish amounts on dream cruises or regular holidays.

A more recent report, by the Institute for Fiscal Studies3, suggested that, unless there were significant costs at the end of life, most financial wealth (including property) among those currently retired was more likely to be left to younger generations than used to finance their retirement spending.

Your own spending patterns will be dictated by factors such as your personal preferences and circumstances. It might be difficult to think about what you’re likely to spend in retirement - you don’t know future inflation levels or what events might dictate your plans, for example. But when it comes to getting our financial plans in order, it’s useful to develop at least some idea of where you money might go.

One option, for instance, might be to make a list of the possible essentials, holidays and regular outgoings that you can envisage. That might give you a sense of how your money might be distributed across different outgoings, and a general idea of the income and/or assets you’ll need in order to enjoy the retirement you want.

Next: Getting the most from your retirement savings

Your choices for your life after work will influence – and be influenced by – your retirement savings and how you decide to use them.

We will move on to that in a subsequent article. But in the meantime you might find it useful to read two of our free investor guides. Part of a range to help you navigate your way around the world of personal finance and investment and make the most of your money in the process.

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Planning for life after work

This practical guide walks you through how to build a financial strategy for your retirement. From putting the most effective investment plans in place, to working out the best way to get an income and ensuring your loved ones are looked after.

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Getting the most from your pension savings

Pensions are one of the most tax-efficient ways to save for your longer-term future. In this guide, we cover the main things you need to know about tax and your pension. From tax relief on what you pay in and how it works, to your Annual and Lifetime Allowances for pension savings.


Important information

This is provided for general information only and takes no account of personal circumstances. It is not a recommendation to buy or sell. It is provided solely to support you in making your own investment decisions. If you have any doubts as to their suitability you should seek expert advice. Alliance Trust Savings does not give financial or investment advice.

Please be aware that the value of investments can fall as well as rise so you could get back less than you invest. Past performance is not a guide to future performance.

1 ONS – National life tables: UK 2015-2017 – 25 Sept 2018
2 International Longevity Centre – Understanding Retirement Journeys: Expectations vs reality – 1 December 2015
3 Institute for Fiscal Studies – The use of wealth in retirement – June 2018, pg 7 (section 3)


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